J. David Grissom, chairman of the university board of trustees, says new leadership and new board are
‘committed to open and honest action.’
After months of weighing litigation, the University of Louisville announced Thursday it won’t sue its financially troubled foundation, which lost up to $100 million through excessive spending and unwise investments.
But in exchange, the foundation agreed to end multiple practices that led to its “past management issues” and to additional monitoring and restrictions, the university said in a news release.
The deal approved by the board doesn’t let ousted President James Ramsey and other high paid former employees off the hook: The foundation agreed to pursue all claims against ex-directors and officers that are “likelier than not” to result in a recovery – with all settlements subject to prior approval by the board of trustees.
The foundation also agreed to numerous reforms recommended in a forensic audit released in June.
Under the agreement, the foundation will make no investments in startup companies or real estate without written board approval. Foundation directors, trustees and university employees are also prohibited from having any stake in companies in which investments are made.
The deal requires that the foundation liquidate all start-up company assets and all other assets other than real estate.
Cracking down on excessive pay, the foundation will be banned from providing deferred compensation or tax “gross ups,” and salaries must be approved by the board of trustees annually. Hiring and pay of the foundation’s top executive officers must be approved by a committee that includes four trustees who serve on both boards.
And the foundation is also prohibited from spending money for lobbying, billboards or newspaper ads, like the one purchased in Courier Journal defending Ramsey’s performance before he was forced to resign last year from the foundation and university.
Diane Medley, a university trustee who also chairs the foundation’s board, said “both groups are in agreement and it is a new day before both.”
She said many of the provisions were already in place.
The board had considered suing the foundation and its past directors and officers since the release of the forensic audit detailing the foundation’s management woes.
In releasing the new agreement with the foundation, the university said a lawsuit would have been “costly, lengthy, and disruptive,” so the board decided to focus on safeguards to ensure future “donor confidence.”
“The university and the Foundation have not closed the book on future litigation,” board chairman J. David Grissom said. “However, the resolution signals the Board of Trustees’ confidence that all critical management issues have been addressed, allowing the university and the community to focus confidently on future success.”
Grissom told reporters in August that the board had to decide whether protracted litigation would further damage the university’s reputation or imperil the search for a new president.
Auditors Alvarez & Marsal found that the foundation’s officers and directors depleted at least $42 million from the university’s endowment and tried to hide lucrative deferred compensation for Ramsey and his top aides.
The report also said the board made bad investments in real estate and startup companies, and spent all $17.6 million in an “evergreen fund” – even though spending was supposed to be limited to $5 million – on things that included executive compensation and bowl game trips.
The audit found loans were being made that couldn’t be repaid, and that gifts dedicated for other purposes were being used to fund millions of dollars in deferred compensation for Ramsey and other officers.
The audit found that while spending from the endowment was supposed to be limited to about 7.5 percent — to ensure it would be able to support the university in perpetuity — spending from it in some years was nearly twice that.
Andrew Wolfson: 502-582-7189; [email protected]; Twitter: @adwolfson. Support strong local journalism by subscribing today: www.courier-journal.com/andreww
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